HA NOI (Biz Hub) — Shares of average-sized steel firms listed on the local market recovered, thanks to the expectation of positive business results from rising steel prices in the first quarter of 2016.
The shares of Tien Len Steel Corporation (TLH) have increased in value from VND3,400 to VND6,200 each since early this month. On March 29, nearly two million TLH shares were traded at a ceiling price of VND6,600 each.
Nguyen Manh Ha, TLH chairman, said the shares were selected as investors thought his firm would register better business results. Ha said he had imported nearly 300,000 tonnes of steel, three times more than the normal inventory level of 100,000 tonnes. Now the price of steel is 30 per cent higher than the rate at which he had bought it.
Thus, TLH expects to earn VND80 billion in after-tax profits. It also expects to have at least VND170 billion by the end of Q2 to clear the losses it suffered last year due to lower market prices of steel. Ha expects to earn a margin of 25 to 50 per cent on its charter capital.
Like Ha's firm, other average-sized steel firms that faced losses in 2015 have also recovered. When the price of steel dropped globally by about 30 per cent last year, steel firms faced losses as they had bought it at high prices, but could sell at low prices only. Now thanks to higher prices, most of the steel firms have recovered.
SMC Trading Investment Joint Stock Company (SMC), which lost VND195 billion last year, has set a target of earning VND60 billion in profits this year. Since the beginning of this March, SMC shares rose from about VND7,000 to VND9,500 each on the stock market.
Thien Nam JSC (TNA) said it had recently sold its entire inventory last year for an extra VND3,000 per kilogram, selling one kilogram at VND10,000 to VND11,000. Within a month, TNA shares rose from VND37,000 to VND56,000 each on the HCM Stock Exchange.
DIC Trading and Investment JSC (DIC), seeing the market trend, bought steel at US$285 per tonne. Now it has sold it for $350 per tonne.
While most of the firms' leaders feel the prices are under a demand-supply rotation, the price should recover this year after staying lower than the input price for a whole year.
Nguyen Ngoc Anh, chairman of SMC, also said there was another reason for the current increase in steel prices. He said the Australian iron ore, which supplies 70 per cent of the demand in China's market calculated a $6 billion loss in the last six months of 2015. Then, it suddenly raised the prices of iron ore by 20 per cent on March 7.
Most of the firms said though steel prices did not have a sustainable recovery, they had already helped the firms to achieve better results in the first quarter to recover the losses suffered in 2015.
Meanwhile, local giant steel enterprises such as Hoa Phat and Hoa Sen have forecast better margins, thanks to the rising prices. Last year, the two firms remained profitable, even when steel prices fell, thanks to their brand value and good distribution systems. — VNS